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The Effect of League Design on Club Revenues in the Scottish Premier League

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Abstract

This paper exploits a sharp regression discontinuity design (RDD) to causally identify the impact of the league ‘split’ on Scottish Premier League (SPL) club revenues. The data used are drawn from 21 completed seasons in which the institutional arrangement has been in place in Scotland’s elite tier of professional soccer. The empirical analysis fails to detect strong or persuasive statistical evidence that the league design substantially impacts the revenue distribution of the participating clubs. Given the league design is found to be close to financially-neutral for the clubs most directly affected by the ‘split’, it is not viewed as a catalyst in driving financial inequality within the league.

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Notes

  1. A concern for the implications of unbalanced schedules and ‘split’ league formats is not unique to European soccer as Lenten (2011) illustrates for Australian rules football, and Agha and Rhoads (2018) for minor league baseball in the US.

  2. We use the term Scottish Premier League (SPL) throughout the text to describe the country’s highest elite tier, though it is acknowledged the Scottish Premier Football League (SPLF) was formed in 2013 when the Scottish Premier League (SPL) and the Scottish Football League (SFL) merged.

  3. The financial rewards for playing in European competition are significant even if progression through the rounds is minimal. The Edinburgh club Hibernian FC finished third in the SPL in the 2020/21 season and thus qualified for participation in the third tier of European club competition (the Europa Conference League). The team played just four games in this competition winning and drawing one in the second qualifying round, and losing across both legs in the third qualifying round. However, for these four games it received approximately £675,000 in prize money from UEFA, roughly one-third of what it received for finishing third in the SPL. The European prize money was about 6% of its total revenue in that year, which excludes gate receipts, stadium expenditures and any broadcast fees obtained for these European games.

  4. The importance of Glasgow Celtic and Glasgow Rangers to the SPL cannot be under-stated. Morrow (2006) noted “…….[u]nderstanding Scottish football means appreciating the significance of Celtic and Rangers, the so-called ‘Old-Firm’.”(p.92), and Vamplew (2022) remarks that the importance of these two clubs is actually “….enshrined in the premiership itself, where two votes (from 12 clubs) against any motion is sufficient to defeat any proposals..”(p.74).

  5. The impact of the ‘Old-Firm’ on spectator attendance for the league’s other participating teams is sizeable. Using data covering the SPL seasons from 2000/1 to 2017/18, the average increase in spectator attendance associated with the visit of an ‘Old-Firm’ team prior to the ‘split’ is estimated to be of the order of 35%. Furthermore, Barnard et al. (2018) report the average revenue from gate receipts and other match day related activities within the stadium comprised approximately 40% of total income for SPL clubs, which is among the highest across Europe’s top tier leagues.

  6. See pp.12–13 of UEFA (2015) for a detailed account of the European leagues that use a ‘split’ format and a description of their various designs.

  7. Glasgow Rangers was one of the original founding members of the Scottish Football League. The club enjoyed an uninterrupted tenure in Scotland’s top tier until the end of the 2011/12 season, when it was financially liquidated. It was subsequently reformed under different ownership and admitted to the fourth national tier of Scottish football. After a series of promotions, the club eventually re-entered the SPL in the 2016/17 season.

  8. Morrow (2006) provides a review of the early financial state of elite Scottish soccer in the period immediately after the introduction of the Scottish Premier League and notes the global financial crisis enabled Scottish Premiership clubs to negotiate debt write-offs with various financial institutions. However, the UK arm of the Irish satellite broadcaster (Setanta) entered administration on the 23rd June 2009 thus collapsing a broadcast deal with the SPL and placing several clubs in financial difficulties. The SPL paid the outstanding amounts due to the affected clubs but the subsequent broadcast deals negotiated proved less lucrative for the league.

  9. The estimate reported here roughly approximates to a trebling in the underlying club revenue variable since loge(3) = 1.0986.

  10. The magnitude of the luck factor in determining soccer match outcomes is subject to much debate with Anderson and Sally (2013) arguing it is as high as 50%. Assume the factor was closer to say 30%, which is consistent with estimates based on using performance variance measures in professional soccer (for example, see Table 4-12, Mauboussin (2012)). Then, translated to points lost/gained over part of a playing season, the median three-point differential reported in the text here for those SPL teams competing at the ‘split’ is well within the bounds determined by the role of ‘luck’ or randomness.

  11. It is interesting to note that of the 18 clubs that participated in this league for more than a single season over the period of our analysis, ten different clubs featured at rating 6 (i.e. 7th position in the SPL at the ‘split’), while nine featured at rating 7 (i.e. 6th position in the SPL at the ‘split’). Using runs tests (see Wonnacott & Wonnacott (1990, pp.533 – 535) for the clubs that featured at these ratings, we find for the majority evidence of randomness in their allocation between the ‘Championship’ and ‘Relegation’ sections from one season to the next. Overall, there appears to be a good degree of mobility in these clubs’ positions across the ‘split’ over the 21 playing seasons. This could be taken to tentatively indicate that the ‘split’ does not appear to harden or polarize club league positions over time potentially weakening claims that the ‘split’ is a driving factor for the SPL’s inter-seasonal competitive imbalance.

  12. Neither Lenten (2008) nor Fort and Lee (2020) provide formal statistical tests to determine whether the change in competitive balance reported in their respective studies is statistically significant.

  13. As noted earlier, the average Gini coefficient value over the 21 seasons is 0.59. Using the RIF-based Gini coefficient inspired by the work of Firpo et al. (2009) and Essama-Nssah and Lambert (2011), which is estimable by OLS, we find no evidence of a change in club revenue inequality since the inception of the SPL. The Wald-transformed joint test of significance for the 20 season effects in a RIF-based Gini regression model is estimated to be a statistically insignificant 0.7 ~ F(20, 211).

  14. The gate revenue sharing arrangements in Scotland were considerably more generous than those originally introduced in England. As noted by Inglis (1988), a 20% sharing rule of net gate receipts was introduced in England in 1919 and remained in place until its abolition at the start of the 1982/3 season. In contrast, the sharing rule in Scotland was one of equality with visiting sides receiving a 50% share of net gate receipts until its abolition in February 1981.

  15. It is acknowledged that RDD requires larger sample sizes than a randomized experiment (RE) to achieve the same level of precision for the causal estimate. This imprecision is linked to the fact that the variable DUM and the ‘rating’ variable included in the RDD specification [1] are highly correlated by construction with the resultant multicollinearity inducing inefficiency. The correlation coefficient in this case is 0.87. Goldberger (2008) demonstrates that the sample under RDD must be 2.75 times greater than under a RE to generate the same level of precision assuming a normally distributed ‘rating’ variable. In circumstances where the ‘rating’ variable is uniformly distributed, as in the current case, the RDD sample size must be four times greater.

  16. A recent study of Chakravarty and Reilly (2023) explores the impact of the ‘split’ format across 13 different top tier soccer leagues in Europe using attendance data for a number of recent seasons. The leagues used in the analysis adopt a variety of different ‘split’ formats with some using a greater number of matches in the second phase than in the SPL in conjunction with a perfectly balanced fixture schedule. The authors detected a strong robust effect with the average spectator attendance gap between those that qualify for the top section and those that do not of the order of 70%, almost three times the effect detected for the SPL. Thus, it may prove difficult to generalize the SPL results found here to other leagues.

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Acknowledgements

The authors are extremely grateful to the editor and two anonymous referees of this journal for their constructive and helpful comments on earlier drafts of this paper. The authors are indebted to Stephen Morrow for providing information on club financial data. In addition, Daniel Doherty, Jim Falconer, David Gray, Paul Smith, and Andrew Strong are also thanked for providing financial data used in this paper. The authors are also grateful to Keith Sharp at the Scottish Football Association for providing data, guidance, and advice. However, the usual disclaimer applies.

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  1. Department of Economics, University of Sussex Business School, Jubilee Building, University of Sussex, Brighton, BN1 9SL, UK

    Barry Reilly

  2. School of Economics, University of Surrey, Guildford, GU2 7XH, UK

    Robert Witt

  3. The Centre for Economic Performance, London School of Economics, Houghton Street, London, WC2A 2AE, UK

    Robert Witt

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Reilly, B., Witt, R. The Effect of League Design on Club Revenues in the Scottish Premier League. Eastern Econ J 50, 1–28 (2024). https://doi.org/10.1057/s41302-023-00260-3

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